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Problem 1 Max 41,C2,5 u=C2 subject to ci + s =w (budget constraint in period 1), C2 = (1+r)s (budget constraint in period 2), where
Problem 1 Max 41,C2,5 u=C2 subject to ci + s =w (budget constraint in period 1), C2 = (1+r)s (budget constraint in period 2), where u is the utility function, and w is the wage income in period 1, and 1+r is the interest rate between period 1 and period 2. and ca are the consumption level in period 1 and 2, respectively. s is the saving in period 1. Solve the following maximization problem and derive the followings. Q1: Derive the optimal values of G. Q2: Derive the optimal value of c2. Q3: Derive the optimal value of s
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